Franklin Templeton Presses SEC for On-Chain Trading Exemption
TREE NEWS reports: Franklin Templeton met with the U.S. Securities and Exchange Commission’s crypto working group on October 9 to discuss regulatory exemptions needed to let tokenized money market funds and ETFs trade through blockchain-based liquidity pools. The asset manager, which already operates a tokenized money market fund on public blockchains, is now pushing for a clearer legal pathway that would allow these products to be bought, sold and settled on-chain without running afoul of existing securities rules.
The Regulatory Gap
The core issue is that current U.S. securities law was not written with decentralized trading venues in mind. A tokenized fund share may represent a traditional security, but if it trades through an automated market maker or a DeFi liquidity pool, it can trigger broker-dealer, exchange or clearing agency registration requirements that no blockchain protocol is equipped to satisfy. Franklin Templeton is effectively asking the SEC to carve out a workable exemption so that tokenized fund shares can move through on-chain liquidity venues under defined conditions.
Why It Matters
This is one of the clearest signals yet that major traditional asset managers view tokenization not as a pilot experiment but as core infrastructure. Franklin Templeton has been among the most aggressive TradFi firms in embracing public blockchains, and its willingness to engage the SEC directly suggests it wants regulatory certainty before scaling on-chain products.
- TradFi-DeFi convergence: A formal exemption would create a legal bridge between regulated fund products and decentralized trading infrastructure.
- Liquidity implications: On-chain liquidity pools could give tokenized funds 24/7 secondary market access, a major departure from traditional market hours.
- Competitive pressure: Rivals like BlackRock, Fidelity and WisdomTree are also exploring tokenized products, making first-mover regulatory clarity valuable.
Forward-Looking Perspective
The SEC’s response will be closely watched across both Wall Street and crypto. A favorable outcome could accelerate the tokenization of money market funds, Treasury products and eventually equity ETFs. A restrictive one would push innovation offshore or into less regulated venues. Either way, the meeting marks a pivotal moment in the long-running effort to reconcile securities regulation with blockchain-native market structure.
